Canadians caught downloading illegal copies of music and movies online could be slapped with a penalty of $500 under new federal legislation to overhaul the Copyright Act of Canada, which was last updated in 1997, four years before the introduction of the iPod.

The long-anticipated amendments, which Industry Minister Jim Prentice said are needed to bring Canada up to date with the rest of the digital world, triggered a flurry of heated reactions among consumers, artists and the entertainment industry yesterday. They also raised the question of who will have to play the role of copyright cop on the Internet.

Industry groups applauded the government for finally tabling the legislation, which they say will help to protect the intellectual property of thousands of artists and distributors.

Critics say the new legislation too closely resembles the U.S. Digital Millennium Copyright Act, which has been criticized as too stacked against consumers in favour of rights holders such as the movie and recording industries. They fear it could force ordinary Canadians to pay thousands of dollars in penalties for copying their own legally purchased music to CDs or uploading videos to sharing sites such as YouTube.

"This is a unique made-in-Canada approach to copyright reform," Mr. Prentice said during a news conference on Parliament Hill yesterday. "This bill balances the rights of creators on one hand and consumers on the other."

The bill emphasizes cracking down on those Internet users who upload and share files, setting much higher penalties than for downloaders.

Catharine Saxberg, executive director of the Canadian Music Publishers Association, said the new legislation is an important first step toward recognizing the importance of intellectual property rights in Canada.

But some artists were quick to criticize the new legislation.

"The question is, who gains from this bill?" said Brendan Canning, a member of the Canadian Music Creators Coalition and a co-founder of the band Broken Social Scene. "It's not musicians. Musicians don't need lawsuits. ... What we do need is a government that is willing to sit down with all the stakeholders and craft a balanced copyright policy for Canada that will not repeat the mistakes made in the United States."

The current Copyright Act allows for a maximum fine of $20,000 for each instance of copyright infringement, whether downloading or uploading, although Canadian file sharers have yet to face the same lawsuits that have been launched by record companies in the United States.

Under the new legislation, the maximum amount of statutory damages a court could enforce would be $500 for all infringements contained in a lawsuit, although a judge could still award other penalties.

What has some critics especially concerned about the bill is that uploaders and anyone caught hacking "digital locks" - such as copy controls or digital rights management (DRM) technology - could face damages of up to $20,000. The digital lock provisions could lead to thousands of dollars in penalties for average Canadians, said University of Ottawa law professor Michael Geist.

"Fundamentally, it really has a direct impact on what people can do with all sorts of consumer products ... that are now subject to certain limitations with potentially huge damage awards for Canadians that violate the rules," Prof. Geist said.

TV viewers would also be affected by the new legislation, which would make it legal to record shows, something which is currently illegal. Canadians would not be allowed to keep the recordings forever in digital stockpiles, nor would they be allowed to record certain programs flagged with digital locks by broadcasters.

But one big question remaining is who will police the new digital frontier.

The new legislation calls on Internet service providers to discourage copyright infringement, but these companies will not be held liable for the actions of their users.

Under the new Canadian legislation, ISPs would be obliged to inform subscribers when a complaint has been launched against the consumer by the owner of a copyright; however, they would also be obliged to keep track of that user's contact information for six months in the event that the data became necessary for legal proceedings.

Those provisions will have serious privacy implications for service providers, said Rocky Gaudrault, chief executive officer of TekSavvy Solutions Inc., an independent ISP based in Chatham, Ont. "Where is the line drawn between the Privacy Act versus this new copyright bill?" he said.

Typically, ISPs release the personal contact information of their subscribers only for police requests, usually in cases involving identity theft or child pornography. Having to track users' data based on requests from industry groups presents a sticky situation, he said.

The federal government announced its intention to update the Copyright Act in its 2007 Speech from the Throne, and promised a number of organizations in the recording and media industries that the legislation would be tabled before the House of Commons breaks for the summer.

However, with Parliament set to break soon, some sources expect the legislation to be left to die by the minority Conservative government, which is likely to face harsh criticism from opposition parties, making the bill difficult to pass.

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